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Quick Overview of Redundancy Payments

When you are looking at terminating an employee by way of redundancy there are several factors you need to consider before taking action. Below is a quick overview, however, it is recommended to seek advice. Redundancy pay may vary depending on your Registered Agreement, applicable Modern Award and number and type of employees you have.

When redundancy can be used as a way to terminate someone’s employment

Ending someone’s employment by way of redundancy can be done when an employee's position is no longer required by an employer due to restructuring or operational changes in the employer's enterprise which renders their position unnecessary.

Essentially the work or role is no longer required to be performed by any employee. Redundancy can also occur when an employer becomes insolvent or bankrupt.

Restructuring and operational changes may occur when new technologies are introduced (ie a job is completed through the technology rather than a person), the business closes, has a decline in sales or production, the business relocates interstate or overseas or there is a restructure or reorganisation because a merger or takeover happens.

Consulting with employees who may be affected

All awards and registered agreements have a consultation process for when there are major changes to the workplace, such as redundancies.

This consultation process should occur as soon as possible after the decision has been made to make changes.

The consultation process may look like this:

  1. Written communication to affected staff regarding changes in the business, the reason for the major changes and the impact the changes may have on them.

  2. Invite those affected to attend a discussion around the changes and invite them to ask questions and suggest ideas about the changes.

  3. Consider any ideas and changes. See what other roles are an available across the business. Perhaps those affected could be offered a different position that matches their experience and qualifications?

  4. Should no other options be available, provide notice regarding the redundancy in writing and what the time frame will be. Include what they will be entitled to.

Who are entitled to redundancy pay and how much?

Most full time and part time employees who work for an organisation with 15 or more staff are entitled to redundancy pay based on years of continuous service.

Employees who do not get redundancy pay are:

  • employees whose period of continuous service with the employer is less than 12 months

  • employees employed for a stated period of time, an identified task or project, a particular season

  • employees terminated because of serious misconduct

  • casual employees

  • trainees engaged only for the length of the training agreement

  • apprentices

  • employees who work for a small business with less than 15 employees (some exceptions)

Redundancy pay is on top of any notice periods and accrued entitlements such as annual leave and LSL.

Employee's period of continuous service

with the employer on termination Redundancy pay period

At least 1 year but less than 2 years 4 weeks

At least 2 years but less than 3 years 6 weeks

At least 3 years but less than 4 years 7 weeks

At least 4 years but less than 5 years 8 weeks

At least 5 years but less than 6 years 10 weeks

At least 6 years but less than 7 years 11 weeks

At least 7 years but less than 8 years 13 weeks

At least 8 years but less than 9 years 14 weeks

At least 9 years but less than 10 years 16 weeks

At least 10 years 12 weeks

Before calculating redundancy pay make sure you check the applicable Registered Agreement and Award as redundancy pay may vary. For example, under the Building and Construction General On-site Award, the minimum redundancy pay is different.

Also note where an organisations is considering making redundant 15 or more employees, you must give written notification to the Department of Human Services.

Essential HR in partnership with Employment Innovations are leading providers of employment services designed to increase productivity and ensure compliance. Its services and solutions include all the tools that every Australian small to medium-sized employer needs – including workplace advice, legal services, outsourcing payroll, payroll software, human resource management & HR software.


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